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A rental property is one of the largest investments you can make, and in order to make sure your property is as lucrative as possible, it’s important to protect your investment to the best of your ability. When establishing yourself as a real estate investor, it is critical to acquire the right insurance to protect your business, your property, yourself and your tenants. At first glance, the range of insurance options can seem exhausting, but each involved party needs to be covered by the appropriate policy to stay safe — physically, financially and legally.

Homeowners Insurance

Many landlords rely on their standard homeowners insurance to protect their rental properties, but typical homeowners coverage is usually not sufficient to protect your investment property. Homeowners insurance usually covers owner-occupied homes, while a landlord-specific insurance policy will cover liability and damages related to tenant-occupied homes.

Depending on your specific situation, homeowners insurance may be sufficient without needing to seek out landlord insurance. If you only plan to rent out your property on occasion — such as for a specific event or while you’re on vacation — your homeowners insurance may suffice. If you plan to rent out single rooms while you also occupy the property, homeowners insurance may also be enough. Coverage varies based on your insurance company and policy, so be sure to contact your provider before you start looking for tenants.

Landlord Insurance

If you’re planning on renting out your investment property to tenants on a regular basis, you’ll need to look into landlord insurance coverage. Insurance policies designed specifically for landlords provide protection not only for your property, but added protection for financial loss and obligations associated with your rental property. Similar to homeowners insurance, landlord insurance will help cover the property itself and your liability when it comes to the tenants who live at the property.

Depending on the insurance company you choose and the options included in your policy, there are a variety of coverages that may be included. Personal property coverage can help protect belongings used to service the rental property if you choose to rent the space furnished, where legal fee coverage can help protect you if you need legal representation regarding a lease agreement with a tenant. Not every landlord will choose to include every available coverage option on their policy; it is up to you to decide how much you want to spend in order to manage costs for damage or liability associated with your investment property.

Property Management Insurance

If you plan to manage multiple rental properties as a business, your insurance needs will once again change. If you are involved professionally in renting residential real estate, managing rental properties for others or contracting services for rental property owners, you’ll likely need to look into property management insurance coverage. Property managers need to have insurance that covers their business, their clients, their tenants and the properties they manage. If you’re simply a real estate investor or private owner renting out your home, look toward landlord insurance instead of property management insurance.

Renters Insurance

While landlord insurance will protect many things regarding your rental property, it only protects the owner’s property and belongings, not your tenants’ personal possessions. It is good standard practice to require your tenants to have their own renters insurance policy, which is an affordable way for your tenants to protect themselves and their personal property. Encouraging (or requiring) your tenants to have renters insurance can save you time and money should any accidents, damage or theft occur at your property.

Many renters don’t understand the importance of renters insurance because they assume your landlord policy will protect them. In fact, over 90% of homeowners carry a homeowners insurance policy, but less than 50% of renters have renters insurance in place. Renters insurance is an amazing tool to give your tenants protection for their personal belongings, against liability charges and against medical charges, and it helps them cover the cost of any property damage that may take place.

Equipping yourself and your renters with the right insurance is one of the best things you can do as a landlord to protect your business, your property and your tenants.